Saskatchewan to Avoid a Recession

The week ending Aug 21/15

 

Saskatchewan to Avoid a Recession

 

There is something of a consensus building on Saskatchewan’s economic performance for this year.

BMO Bank of Montreal has just updated its provincial outlook, pegging this province’s projected growth rate at 2-tenths of a percentage point this year. That is consistent with some of the other bank forecasts we’ve been seeing.

The bank also says next year will bring a rebound with growth of two percent anticipated. That is one of the more upbeat outlooks out there as it will put us in the top three among the provinces.

When compared to other provinces – especially the oil producers – Saskatchewan seems to be holding up fairly well. In this forecast Alberta is projected to see a contraction this year with positive numbers returning in 2016 but Newfoundland is seen as having three consecutive years of decline – last year, this year and next.

One observation we can draw from this is that Saskatchewan has a somewhat more diversified economy with potash and agriculture complementing oil production, contrasting Alberta where oil is such a big part of the economy.

Real Estate

The headline suggesting Regina may in a residential real estate bubble and is subject to a significant drop in prices is about a year too late.

The warning was issued last week by CMHC, Canada Mortgage and Housing which warned Regina had joined Winnipeg and Toronto in the high risk category for a correction. Interesting, but more like history than current.

The fact is we’ve seen the correction already occur. Prices have fallen in the past year and, more importantly, builders have all but stopped building, particularly single family units. Starts in the past year have basically been cut in half and that is likely to see even more reductions as inventory is absorbed.

It takes nine months to build a house in this climate so the tracking of numbers can get out of sync as data capture history rather than activity. Because builders know the current market they have pulled in their horns and, in many cases, reduced prices to get rid of excess inventory which is a tonic to the market, not a danger.

Manufacturing

Sometimes timing can distort market conditions. That’s one of the reasons we so often hear economists and statisticians tell us that one month does not make a trend.

Such was the story in June for the manufacturing sector here in Saskatchewan and across the country.

The figures for this sector rose from May to June, although they were down compared to June a year ago. The latter finding is no surprise given that the oil industry was still firing on all cylinders back then.

But the increase from May to June was largely a timing issue. According to StatsCan the biggest increases were found in the chemical sector which includes fertilizer. It turns out that farmers delayed some of their purchases this year and that pushed the overall sales numbers into June for suppliers.

Another big change was in the fabricated steel business. This is one that has felt the pinch of lower oil prices as projects get mothballed. But the most noticeable change was in inventories – which went down suggesting either stronger sales or lower production.

 

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Paul Martin

Paul Martin You’ve heard him on the radio, seen him on TV and read him in newspapers and magazines. Paul is a popular keynote speaker on topics ranging from the economy to tapping community potential. His unique blend of communication and business knowledge has made him a highly sought-after consultant. As the Chair of Martin Charlton Communications, Paul is MCC’s ‘go to’ guy for all things business in Saskatchewan. He is the chair of four Saskatchewan branches of TEC (The Executive Committee) – a global organization dedicated to improving the performance and enhancing the lives of CEOs – which has over 50 CEOs and senior executives among its Saskatchewan members. The long and short: Paul knows the province’s corporate community and business economy like few others. He is a potent conduit for anyone looking to do business in Saskatchewan, Canada’s fastest growing economy. His strategic advice is unrivalled.

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